NDIA’s Carlisle on Making the Case for Bigger 2019 DoD Budget

Gen. Hawk Carlisle, USAF Ret., the president and CEO of the National Defense Industrial Association, discusses making the case for bigger defense budgets during an interview with Defense & Aerospace Report Editor Vago Muradian at the Reagan National Defense Forum at the Ronald Reagan Presidential Library in Simi Valley, Calif. Our coverage is sponsored by L3 Technologies and Leonardo DRS.

General (Ret) Hawk Carlisle

National Defense Industrial Association

Reagan National Defense Forum

November 2018

Vago Muradian: Welcome to the Defense and Aerospace Report. I’m Vago Muradian here at the Reagan National Defense Forum, America’s leading gathering of defense leaders from across the country whether military, civilian, from industry or thought leaders. We’re here at the Ronald Reagan Presidential Library in Simi Valley, California. Our coverage here is sponsored by Leonardo DRS and L3 Technologies.

We’re honored to be talking to General Hawk Carlisle, retired United States Air Force who heads the National Defense Industrial Association. Sir, it’s always a pleasure seeing you.

General Hawk Carlisle: It’s good to see you Vago, as always. I love talking to you.

Mr. Muradian: It’s an absolute pleasure. We were talking airplanes. We’re not going to talk airplanes now, we’re going to talk a little bit about budgets.

We’re in a position where Deputy Secretary Shanahan had talked about this being a masterpiece budget, the ’20 budget that was going to be in the bill. You went through many cycles of that throughout your Air Force career. But now we’re looking at a real split. The incoming Chairman of the House Armed Services Committee is saying that 700 is likely going to be the ceiling. Jim Inhofe, the Chairman of the Senate Armed Services Committee is talking about 733 as a floor. And of course we have the President now looking at much more of a $700 billion budget, even though there are appeals. Secretary Mattis and Inhofe and Mac Thornberry are going to meet with the President and Mick Mulvaney next week apparently to make their case for more money, to lobby for more money.

How do you see this playing out, given that your organization represents the whole piece of contractors across from the air systems all the way to undersea?

General Carlisle: It’s going to be a big debate. The challenge is that we had a big hole to dig out of. If you think about sequestration, what we went through with the BCA, I grounded squadrons, I mean entire squadrons for 90 days. So we really had to get back to readiness. That was a big hole to dig out of. And ’18 and ’19 were fabulous. They started our move into that, but it’s not done. I think that’s the biggest threat. That’s part of the part that we have to educate Congress and the American people on is we made a good move. We started to reverse the trend where we’re climbing out of that readiness and modernization hole. But if we do something drastic in ’20, take $33 billion out of the budget, then all of that work will go for nothing.

What we can do is show the American people a receipt that says hey, you spent this much money and this is how much we’ve improved, which is what Secretary Mattis is asking us all for. I think that’s exactly right. Here’s the gains we’ve made, but if we want to take advantage of these gains and keep them going to do what we need to do, then we’ve got to keep the budget at the 733 level for ’20 and maybe even a little higher as we move our way forward.

I think the interesting point that came out a couple of times in the day-to-day is, we’re at the smallest percent of GDP and the smallest percent of the federal budget that we’ve been in decades. So we really do have to keep this momentum going forward.

Mr. Muradian: From a great power competition standpoint, the National Defense Strategy Commission made its report. They’re arguing for a trillion dollars, almost a trillion dollars in sustained spending to build those capabilities, to back the National Defense Strategy, which everybody agrees was a good strategy. But fiscal reality intervenes. The debt is very, very large. There are concerns that just in a couple of years servicing the debt will be bigger than the defense budget. From that standpoint it seems that it’s going to put a cap on spending.

So it’s a two-part question. What is it that industry and the government have to do better about making the case to the American people that even though they have a sense that their military is the best in the world, and it is, it’s relative margin of superiority is decreasing and it’s important to invest?

So how do you make that case? That’s the first piece. Then I’m going to ask you a tough choices question after.

General Carlisle: That’s a great point, and I think that is what we have to do. We have to convince the American people that it’s the technology edge that has shrunk significantly. We look at what the Chinese are doing in particular and the Russians to some extent. We know that they’re developing at a rapid pace and we have to stay pace with them. We’re not going to cede that ground. We can’t as nation because we know that they’ll change the world order. They’ll want it a different way and they won’t believe in our liberties and freedoms and the way that the world order that we’ve established since we won in World War II. So we have got to convince them of the capabilities that we have to have.

Then the next thing is capacity. The fact that we do this all over the world is critical to this. We don’t just, it’s not just the South China Sea. It’s not just Europe. It’s not just Latin America. It’s not just the Middle East. It’s the whole world. So our ability capacity-wise to execute across the globe is what we really have to convince the American people of.

Mr. Muradian: One of the things that everybody here has been talking about is tough choices. Kori Schake of the International Institute for Strategic Studies told us that look, innovation is also about what you don’t do not just what you’re going to be doing new.

General Carlisle: Right.

Mr. Muradian: That will mean repercussions industrially, for example. I’m not trying to predicate it, but let’s say we don’t need a certain kind of combat aircraft, or we don’t need a certain kind of ship. Each one of these has very powerful constituencies that are behind them.

Ultimately, what are some ways, and I know that these kind of conversations are ongoing, to incentive industry? Because each one of these is a publicly traded company so they have a fiduciary responsibility to sell their program even if it may not necessarily be the right program at the end of the day.

What are some ways or conversations that you’re having with the department to figure out hey, look, if we start to make these large shifts, how do we sort of incentivize folks to sort of okay, there’s going to be the next thing that we’re moving to, even though it’s a potentially complicated politically, industrially and militarily, to make some of these decisions?

General Carlisle: That’s the million dollar question, right? If I had the answer to that, I’d be doing a different job, I think.

When you think about it, because there is a constituency, and in fact you can always build an argument for those. Because across the board you probably need them, depending on the scenario and what you’re going to do.

What I really think we have to do is, you’ve got to rack and stack. You’ve got to get a priority in. Great power competition, if you think Russia, China. You look at North Korea and Iran and then violent extremism. You go okay, we’ve got priorities. And what does it take in those realms? And if you start with great power competition and go down. And the systems that apply to that are the ones that you have to be cognizant of and the ones that you have to really build for and the ones you have to advocate for.

But you’re right. How do you incentivize the folks that you’re going to say okay, we’re not going to do that part of it anymore. And part of that is partnerships with bigs, competimates as they call them or frienemies, whatever word you want to use. Is how do you build their success into the success of those priorities at the same time?

Again, that’s not an easy thing to do, especially when you include then the congressional piece of it because there’s huge constituencies inside the Congress that’s going to want to keep things going. I mean just look at us today. Try to retire a fleet of airplanes. It’s difficult.

So I think those are the things, but if we can build the partnerships, if we can build foreign military sales and direct commercial sales as part of that, that’s another part where we’re trying to help in the security cooperation. It’s a big avenue for defense industry to earnings per share, to take care of their stockholders. So that’s another incentivize is how do you keep those going and actually grow those a little bit.

Mr. Muradian: Let me ask you one last question, and it’s on cyber. There have been so many penetrations of capability, even some of the most top secret programs have been compromised. Russian and Chinese intruders have resided in American systems for disproportionately long periods of time.

What’s the right, and how’s the industry thinking about this? I mean obviously the department is looking at a whole bunch of new rules, regulations. The Congress has a new initiative on cyber. I know a couple of friends of mine are on both publicly acknowledged and not acknowledged groups to work this issue.

Is this something that’s going to take a lot more investment, a lot more planning to shut all of these doors, and that the whole ecosystem has to be comfortable that this may cost a lot more money than anybody is anticipating at this point?

General Carlisle: I think it’s an evolution over time. I mean part of it, the fact of the matter is a lot of times, and this is an education and an evolution. A lot of times, the problems are cyber hygiene. People just not changing their passwords, using 123456. You know? So there’s more we can do. We’ve got to build it into our being of what cyber is, and everybody’s looking, everybody’s trying to get in. And a lot of that can be solved by that.

I think that government’s got to help, especially with the mediums and smalls. The bigs have got, they’re pretty good at being able to defend their networks. But they don’t know what their third and fourth tier suppliers are, and those third and fourth tier are often small, medium or small business and they may not have the wherewithal. That’s where I think government-furnished capability may be a requirement as we go in there.

And then I think we’ve got to prioritize. If you protect everything, you protect nothing. Right? So the priority’s got to be an F-35 radar or an Aegis missile system is pretty important, so I think we need to go all scale out on that. If you’re looking at just a standard bomb rack, maybe that’s less of a factor. Maybe you don’t have to put as much security into that one.

So I think the other thing that the government owes to industry is how do you prioritize and where do you put your most effort to make sure those systems are protected. And then the lesser ones you know are going to be attacked but you can deal with those a little bit easier.

Mr. Muradian: Last quick question. Ellen Lord is still looking at good ideas from folks. Mike Griffin is also. Looking at changing the acquisition system fundamentally. The two are still working together and still refining how they’re going to be working together ultimately. But what do you hope is going to come out of this new effort in terms of streamlining the system and accelerating it?

General Carlisle: The biggest hope is we get rid of the valley of death. What I really would like to see is a way that between Dr Griffin and Ellen Lord they can come together as you do rapid prototyping. We’ve got the authorities to do that. OTAs. Rapid Capabilities Office. Things like that where you develop technology rapidly and you get it there. Then once you go hey, this technology works, it scales, it’s ready to go, then you have a way to move it into program of record and field it rapidly so you get the capability in the warfighters’ hands quickly. Castle Run, the agile computer software programming work, is an example of that.

So what you really hope between A&S and R&E is that A&S understands what R&E is doing. R&E hands it over and goes hey, this is ready to go. Then you can scale it and you can get it in the program of record and not wait five years to get it in a program of record. Get it in a program of record rapidly.

Mr. Muradian: Retired United States Air Force General Hawk Carlisle who heads the National Defense Industrial Association, NDIA. Sir, it’s always a pleasure. Thanks very much for the time.

General Carlisle: Nice talking to you, Vago. It’s always good to be around you. Thanks, buddy.

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